Weekly Farm Fuels Bulletin | Propane & Diesel Diverge

Posted on 06/13/2018 1:47 PM

 

Farm Diesel

  • Our regional average farm diesel price climbed 6 cents on the week to $2.59 per gallon.
  • According to EIA, national distillate stocks 2.2 million barrels during the week ended June 1 to 116.8 million barrels. That is 34.3 million barrels below the same time last year and below the bottom end of the five-year average range.farm diesel price chart
  • Meanwhile, national gasoline stocks surged to the top end of its respective five-year average during the same week as refiners favor summertime highway fuels.
  • Crude oil volatility is likely to back-off as EIA noted in its most recent Short-term Energy Report U.S. crude production in May averaged 10.7 million barrels per day, which compares to the annual average of 9.4 million barrels per day in 2017. Supply concerns from marginal OPEC producers may support a near-term increase in Brent prices, but solid production figures out of the United States should help insulate WTI for the time being.
  • Our farm diesel/heating oil futures spread (see chart below) stands at 0.43, below our line in the sand. A move above 0.45 would indicate pending downside potential for diesel, but since there is a lag between movements in heating oil futures and farm diesel price moves, ruby red is likely to continue higher for another week or two, especially given heating oil's current bullish fundamentals.

Propanepropane price chart

  • Propane prices fell 6 cents on the week in the 12-state reporting region.
  • Kansas, Michigan and Indiana led declines from state to state and no state posted a higher price on the week.
  • According to EIA, national propane stocks firmed 3.978 million barrels on the week to 47.113 -- 3.312 million barrels below the same time last year.
  • As national supplies build, we will await the summertime low before booking propane for harvest and winter 2018-19.
  • Firmness in WTI crude oil futures alongside still-strong export demand for LP will limit the downside for retail propane this summer.

Fuel
5/28/18
6/4/18
Week-over Change
Current Week
Fuel
Farm Diesel
$2.52
$2.53
+6 cents
$2.59
Farm Diesel
LP
$1.40
$1.39
-6 cents
$1.33
LP

Our farm diesel/heating oil futures spread compares the weekly average retail farm diesel price with front-month heating oil futures as of the close on the previous Friday. A move below the "line in the sand" indicates pending upside risk. A move above our "line in the sand" indicates downside potential.

farm diesel heating oil futures spread


 

 

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